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The European Debt Crisis. What caused the global recession of 08?. And thus caused the European debt crisis. Basic Economics - The Bank Run. “It’s a Wonderful Life”. America Sneezes and the World gets Pneumonia!. The Housing bubble bursts 2006. The bubble burst.

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Presentation Transcript
what caused the global recession of 08
What caused the global recession of 08?

And thus caused the European debt crisis

basic economics the bank run
Basic Economics - The Bank Run
  • “It’s a Wonderful Life”
america sneezes and the world gets pneumonia
America Sneezes and the World gets Pneumonia!
  • The Housing bubble bursts 2006
the bubble burst
The bubble burst
  • By August 2008, 9.2% of all U.S. mortgages outstanding were either delinquent or in foreclosure. By September 2009, this had risen to 14.4%. Between August 2007 and October 2008, 936,439 USA residences completed foreclosure.
the american recession of 2008
The American Recession of 2008
  • Adjustable rate mortgages/Subprime mortgages
  • Lehman Brothers & mortgage securities (MBS)
  • Fannie Mae
  • Moodys and other bond rating agencies
  • Property taxes
what caused the crisis
What Caused the Crisis?
  • American Housing Market
  • UK Housing Market
  • Profligacy in the PIIGS
  • Decades of Low Interest Rates
  • Inflation in Wages and Goods
  • Overleveraged Banks
  • Lack of competitiveness
european exposure to us housing bonds
European Exposure to US Housing Bonds

Country Banks Losses

  • Britain

Royal Bank of Scotland US $15.6 bn.

HBOS US $9.5 bn.

Barclays US $6.7 bn.

  • Switzerland UBS US $48.6 bn

Credit Suisse US $13.7 bn.


  • Germany

BayernLB US $14.4 bn.

IKB Deutsche Industriebank US $14.0 bn.

Deutsche Bank US $12.7 bn

  • France

BNP Paribas US $5.8 bn.

debt in the euro zone 17 of 27states1
Debt in the Euro Zone (17 of 27states)
  • Can the Governments in Greece, Portugal, Ireland, Spain and most importantly Italy cover their $4.2 trillion in borrowing without wrecking European banks?
greece as a case study
Greece as a Case Study

The darkening clouds of civil disobedience and anarchy in Greece

european exposure
European Exposure

The end of EMU – “Europe’s Melancholy Union”

us response ambassador smith cu grad and secretary of state clinton
US Response – Ambassador Smith (CU Grad) and Secretary of State Clinton

The Fed v. The European Central Bank

what can they do
What can they do?
  • The Greek gray economy/Greek culture
  • Euro zone writes off half of the Greek debt – EFSF
  • Do the Germans, French and Dutch have to continue to pay?
  • Austerity and taxes vs. Priming the pump
  • Growth – Competitiveness, bureaucracy, deregulation, labor & the welfare state (The German example)
  • The ageing population
  • Integrate or Disintegrate
    • Break up the Euro or even the EU (Nationalists – Anti-globalists)
    • More Sovereignty to Brussels